The US rate must reach a “substantially restrictive” level, above 5%: Bullard

The next increases in US rate they must bring it to a sufficiently restrictive level. And we have not yet achieved it with the substantial increases that we have already applied, observed the governor of the Fed of St Louis James Bullard.

In a presentation that he made in front of Louisville economists, he referred to the statement where the Federal Open Market Committee (FOMC) reported its decision to bring the rate to a level of 3.75% to 4% where they anticipated that “the next increases should bring the rate at a sufficiently restrictive level”.

The rate is not yet in a zone that can be considered sufficiently restrictive, qualified the official who is one of the members with voting rights in the FOMC.

Using cautious assumptions, a basic rule of thumb monetary politics It would indicate that the next increases should bring the rate to around 5 percent.

If we use stricter assumptions, the bullish position would have to take the rate above 7%, he considered.

“Although the official interest rate has increased substantially this year, it has not yet reached a sufficiently restrictive level. To achieve this, rates will have to increase further,” he observed.

At the same event, he pointed out the tendency of the inflation core, which discounts prices that are usually volatile from the measurement, which stood at 5.1% in September. It is twice the inflation target and tells us that we should continue raising the rate.

The strategist Marco Oviedo, whose analyzes have been decisive in the decisions of global investment banks, specified that the 4% where the US rate is, has not yet brought monetary policy to a neutral position.

If the Committee wants to continue placing itself ahead of the inflation curve and correct a bit of the diagnosis of transience, it must go up another 200 points, to enter a restrictive terrain or, go deeper as Bullard is suggesting, he explained.

This means that they would have to bring the rate to a level above 6 percent.